Resident individuals and families on incomes above the surcharge thresholds, who do not have an appropriate level of private patient hospital cover, may be liable to pay an additional Medicare levy surcharge (MLS).
If you have private patient hospital cover and are considering cancelling or suspending your cover while you are overseas, there may be MLS implications if your income exceeds the relevant MLS threshold.
What if you cancel or suspend your private health cover for the period you are overseas?
If you cancel or suspend your private health insurance policy then you are considered not to have any private patient hospital cover for that period. Accordingly, you may be liable for the MLS if your income for MLS purposes exceeds the relevant threshold and you are still a resident for tax purposes during the time you are away.
You should contact your health fund to work out the amount of premium you expect to save by cancelling or suspending your cover and compare that to the MLS you may have to pay.
What if you cancel or suspend cover for yourself but retain the cover for your family?
In family situations, you and all your dependants must have private patient hospital cover to avoid paying the MLS. Cancelling or suspending cover for yourself will mean that you and your spouse may each still be liable for the surcharge if your combined income for MLS purposes exceeds the family surcharge threshold.
What if you take out travel insurance that covers medical treatment or health insurance with an overseas fund for the period you are overseas?
Travel insurance is not private patient hospital cover for MLS purposes. Similarly, private patient hospital cover does not include cover provided by an overseas fund.
Read Medicare levy surcharge.
What if you earned some exempt foreign employment income?
Although the foreign employment income may be exempt, that amount is taken into account when determining your taxable income for MLS purposes, including the threshold.
Example
John is single and an Australian resident. In 2011-12, he has:
- no private patient hospital cover
- exempt foreign employment income of $70,000
- taxable income of $20,000.
John's income, for MLS purposes, is $90,000. As this exceeds the MLS threshold of $80,000 for a single person, he is liable for the surcharge.
The surcharge is 1% of $20,000 (his taxable income), which equals $200.
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For more information about:
If you need help applying this information to your personal situation, phone us on 13 28 61.
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Last Modified: Thursday, 28 June 2012